Patent Troll Legislation Update

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CaptureSeveral states passed laws in the last year to go on the offensive against patent trolls, following in Vermont’s footsteps. Some variants of Vermont’s law of note:

1. Several states have codified the jurisdiction of the state courts to include the conduct of out-of-state patent trolls. However, it’s fairly clear that this provision cannot pass constitutional muster – personal jurisdiction is simply not established by the mere sending of a demand letter. With that said, however, it would be interesting to see how this would play out with the AG of a state involved and with the law being interpreted as a quasi-criminal matter (for example, Louisiana’s AG is the only entity allowed to go after patent troll activities). As Judge Toor made clear a few weeks ago, the constitutional protections offered to patent holders to send demand letters may not be as broad if their conduct trends toward nefarious activity.

2. Several states did not include a bond – it may be that this is already allowed generally in their jurisdictions, but it seems odd not to mention or delineate any boundaries.

3. Some states only allow their AG’s to prosecute patent troll activity.

Interestingly, no state has attempted to take on some of the more vexing activities of patent trolls. For example, there is no attempt to get past the endless shell corporate structures that these entities employ to avoid potential liability. I would think that a state could require an entity to provide notice to the state (similar to what Minnesota negotiated with MPHJ) of its desire to send an infringement letter and in that notice the state could require a) evidence of actual use of the patented technology by the entity and/or b) identification of the real party-in-interest with assets sufficient to present a bond (could they be required to register as a foreign corporation?). This would at least make the AG aware of patent litigation activity in the state (if a troll is sending thousands of letters, requiring notice may dissuade them from doing so).  But I’ve talked about some of these issues before.

Links to each state’s legislation and a brief summary of the differences from Vermont’s law are just below:*

VERMONT:

Standard Bad Faith/Good Faith Assertions of Patent Infringement used.

Bond: Motion by target, determination by court. Troll must post bond equal to good faith amount target would pay to litigate the assertion (not to exceed $250K).

Damages: Standard range of damages.

ALABAMA: No significant differences.

GEORGIA: No significant differences.

IDAHO:

Includes 3 year statute of limitations.

Regarding Bond: No upper limit (typically $250K) imposed by statute. The target of a patent troll must establish a reasonable likelihood that a person has made a bad faith assertion.

LOUISIANA:

Only the state’s attorney general has the authority to investigate and pursue claims.

Person’s (or entities) from outside the state making an assertion in-state is subject to the jurisdiction of the state.

No bond provision.

MAINE: No significant differences.

MARYLAND: No bond provision.

MISSOURI: No bond provision.

OKLAHOMA: Only state attorney general has authority to investigate and pursue claims.

OREGON: No bond provision.

SOUTH DAKOTA:

Includes an exception for publicly traded companies and patent owners using the patent in manufacturing and production of products and materials (in addition to the VT exceptions for higher education and technology transfer organizations for higher education institutions).

TENNESSEE: No bond provision.

UTAH: No significant differences.

VIRGINIA:

No bond provision.

Person from outside the state making an assertion in-state is subject to the jurisdiction of the state.

$2,500 civil penalty for each infraction.

WISCONSIN: No bond provision.

*Many thanks to Mathew Kryman, student at Vermont Law School and former intern at Dunkiel Saunders, for his help in analyzing the statutes.

*Thanks also to Rupalee Rashatwar, Program Coordinator/ Acting Legislative Coordinator at the National Association of Attorneys General for the compiling the legislative activities.

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